Supervisors Cite What They May Do to Ease Crisis
Orange County supervisors don’t know it yet, but they’ve reached a delicate consensus on roughly $1 billion in financial rescue plans proposed by creditors and consultants, an informal survey conducted by The Los Angeles Times shows.
“Since we don’t communicate a lot, (that) is very interesting,” Supervisor Jim Silva said when told about the common ground he shares with his four colleagues.
Though united against tax increases, which many local business leaders and creditors have urged them to consider, the supervisors seem to favor dramatic steps to ease the county’s financial pain:
* Laying off more county workers.
* Selling county assets.
* Privatizing select county services.
If they approve just these measures, to which a majority of them say they are agreeable, the supervisors could net the county between $930 million and $1.4 billion, according to a widely praised report presented earlier this month by the Los Angeles-based Reason Foundation, a libertarian public policy think tank.
Critics of the Reason Foundation report note that its numbers are broad estimates, and that it may be years before the board is able to implement the report’s recommendations, due to legislative and logistics obstacles.
However, such a mixture of savings and revenue would be close to the $1.69-billion loss posted by the county investment pool last year.
Although the supervisors approve of many Reason Foundation recommendations, they are turning their backs on others, which leaves foundation President Robert W. Poole of two minds:
“As a realist, I’m encouraged,” Poole said. “As a political optimist, I’m discouraged.”
Since the county filed for bankruptcy protection Dec. 6, supervisors have struggled mightily to avoid endorsing specific strategies, and none will predict which plans they might some day adopt.
Whether the strategies are offered by the Reason Foundation, interim County Treasurer Thomas E. Daxon or the county’s creditors, the supervisors have said repeatedly in public meetings and private interviews that “further study” and “deliberation” must precede action.
“I think that it’s an insult to the political process for someone to jump to conclusions without full information,” Supervisor William G. Steiner said. “Obviously, I’ll come to my conclusions on these (strategies) over time and after it’s deliberated fully.”
“Everything should be on the table,” Supervisor Marian Bergeson has said repeatedly, refusing to be specific when asked about the Reason Foundation proposals and other ideas floated by interested observers of the county’s financial crisis.
But when the five supervisors were pressed by The Times to answer “yes” or “no” to each proposal on the table, a clearer picture of their common ground and differences emerges.
They like the idea of selling the county’s landfills.
They like the idea of selling John Wayne Airport and a portion of El Toro Marine Corps Air Station, as long as the price is right and the Department of Defense cooperates.
They especially like the idea of selling county-owned buildings and then leasing those buildings back.
“I think there’s real good potential there,” Bergeson said.
“Very supportive,” Steiner said. “Makes a lot of sense.”
They frown at the mention of more layoffs. But the Reason Foundation and others say the county should slim its work force by 10%, or 1,815 positions, and the supervisors agree.
“It’s going to happen,” Steiner said. “It’s reality, and the question is: How many?”
Besides laying off more county workers, the supervisors have been urged by many consultants to cut county workers’ pay by as much as 10%.
But supervisors say they probably won’t.
“I would at this time oppose that,” said Silva, echoing the view held by the board majority. “I think people working here at the county have obligations, and I think (a pay cut) would create problems.”
Said Steiner: “If government is to operate more like a business, then we should have a more productive work force, which may be smaller. But those that remain ought to be well paid.”
The supervisors like the idea of letting private industry run the county’s animal shelters and service the county’s vehicles.
But when it comes to fire protection and emergency medical services, the supervisors are reluctant to relinquish control.
Firefighting, said Steiner, is “one of the few things the county does well.”
And Gaddi H. Vasquez questioned the legality of privatizing emergency services.
Some observers of the county’s financial picture say it’s wrong to put so much stock in the Reason Foundation numbers.
“The problem with your billion dollars (of Reason Foundation proposals) is that the billion dollars they’re saving isn’t the billion dollars we need to fill our hole,” said John Schotz of Saybrook Capital Corp., financial advisers for participants in the county investment pool, who want the county to enact tax increases to pay its debts.
As an example of what he believes are skewed Reason Foundation estimates, Schotz singled out the idea of asset sales, particularly landfills.
Reason Foundation researchers assume the flow of trash to the landfills will remain constant, Schotz said. “And the problem is,” he said, “I think everyone’s expecting . . . because of recycling, the amount of trash going into landfills is going to drop.”
Schotz also took issue with widely shared notions about John Wayne Airport’s potential value. The Reason Foundation says the airport, along with the airport portion of El Toro Marine Corps Air Station, is worth $250 million to $500 million. Daxon estimated the worth at $400 million in a recent report to the supervisors.
Schotz said such estimates are pie in the sky, because they assume many favorable circumstances will be true at the point of sale, such as the federal government donating El Toro to the county “free and clear” and assuming liability for environmental cleanup, according to the foundation’s report.
Because Orange County is in crisis and casting about for ideas, Schotz said, the Reason Foundation is seizing an opportunity to preach its gospel of privatization and small, streamlined government. The foundation has identified interesting areas that may or may not yield savings and revenue, he said. But even if those numbers are correct, the county won’t see the money for years.
“I love good government,” Schotz said. “It’s the greatest thing in the world. The problem is, right now you’re looking for solutions to the general fund problem, and most of the stuff that’s in (the Reason report) didn’t address that.”
Poole conceded that numbers in his report are only estimates. But they are estimates based on close consultation with county officials, he said, along with years of consulting or studying other cities and national governments.
“We’ve been quietly working away, 16 years, building expertise and credibility on this subject,” he said.
As for the speed with which Reason Foundation strategies could be enacted, Poole noted that raising taxes is no quick solution either, since any tax increase would require the approval of four supervisors and a special election.
“We never said all this could be done in three months,” Poole said.
Poole and Schotz warned that the supervisors had better form some consensus--on taxes, cuts or asset sales--and take some decisive steps.
“If the current board balks at some of these actions, the election is coming up within a year, and it could well become an issue,” Poole said.
“The problem is not economics,” Schotz said. “It’s political. The staggering part is, these guys are thinking they might still get reelected.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Where the Supervisors Stand
Business leaders, creditors and the libertarian Reason Foundation have all suggested specific actions that the Board of Supervisors could take to help county government work its way out of the bankruptcy crisis. Supervisors approve of some measures but reject others. In some cases, they offered explanations for their opposition to a plan, and those are included. Estimates on potential savings or revenue vary among sources, which are noted below:
Sell John Wayne Airport and part of El Toro Marine Corps Air Station, which is slated to be closed by 1999.
Potential revenue: $250 million to $500 million *
Marian Bergeson: Yes
Jim Silva: Yes
Roger R. Stanton: Yes
William G. Steiner: No. “I think that would be very difficult to achieve. I think that’s unrealistic.”
Gaddi H. Vasquez: Won’t say
**********
Sell jails
Potential revenue: $100 million *
Marian Bergeson: Yes
Jim Silva: No
Roger R. Stanton: No. “I could be interested in a proposal to privatize future jails.”
William G. Steiner: No. “I think we should have control over our justice system and it shouldn’t be handed off to someone else.”
Gaddi H. Vasquez: Yes
**********
Sell landfills
Potential revenue: $261 million to $522 million *
Marian Bergeson: Yes
Jim Silva: Yes
Roger R. Stanton: Yes
William G. Steiner: Won’t say
Gaddi H. Vasquez: Won’t say
**********
Collateralize assets (Sale and lease-back of county-owned buildings, or outright sale of county office properties)
Potential revenue: $326 million *
Marian Bergeson: Yes
Jim Silva: Won’t say
Roger R. Stanton: Yes
William G. Steiner: Yes
Gaddi H. Vasquez: Yes
**********
Lay off as much as 10% of county work force
Potential savings: $91.2 million *
Marian Bergeson: No
Jim Silva: Yes
Roger R. Stanton: No. “When you get into across-the-board cuts, you’re penalizing children’s social service workers who have one of the most difficult jobs in the county.”
William G. Steiner: Yes
Gaddi H. Vasquez: Yes
**********
Budget cuts
Potential savings: Varies
Marian Bergeson: Yes
Jim Silva: Yes
Roger R. Stanton: No. “I don’t believe in across-the-board cuts.”
William G. Steiner: Yes
Gaddi H. Vasquez: Yes
**********
Pay cut of 10% across the board for county workers
Potential savings: $82 million *
Marian Bergeson: Won’t say
Jim Silva: No. “I would at this time oppose that. I think people working here at the county have obligations, and I think (a pay cut) would create problems.”
Roger R. Stanton: No. “Across-the-board cuts are simplistic; rather, I would favor specific cuts.”
William G. Steiner: No. “If government is to operate more like a business then we should have a more productive work force, which may be smaller, but those that remain ought to be well paid.”
Gaddi H. Vasquez: No. “We do need to be cautious that in the process of reducing our work force or compensation levels that we not lose important talent that is an asset to the county.”
**********
Half-cent increase in the sales tax
Potential revenue: $135 million per year **
Marian Bergeson: No. “It does not solve our immediate problem.”
Jim Silva: No
Roger R. Stanton: No
William G. Steiner: No
Gaddi H. Vasquez: No
**********
Property tax bond issue, in which the county would not raise taxes but would pledge the growth in its property tax base to cover a new bond issue
Potential revenue: $3 billion over five years if the property values grow 4% a year ***
Marian Bergeson: Yes
Jim Silva: Won’t say
Roger R. Stanton: Won’t say
William G. Steiner: Yes
Gaddi H. Vasquez: Won’t say
**********
Utility users tax on electric, gas and cable services in unincorporated areas
Potential revenue: $5.5 million **
Marian Bergeson: No. “Absolutely not, that’s inappropriate.”
Jim Silva: No. “Big, gigantic, definite no.”
Roger R. Stanton: No. “People don’t seem to understand, a utility tax would raise very little revenue.”
William G. Steiner: No. “That’s just a backdoor tax increase.”
Gaddi H. Vasquez: No
**********
Turn over some functions to the cities
Potential savings: Varies
Marian Bergeson: Yes
Jim Silva: Yes
Roger R. Stanton: Won’t say
William G. Steiner: Yes
Gaddi H. Vasquez: Won’t say
**********
Privatize firefighting
Potential savings: $20 million *
Marian Bergeson: Yes
Jim Silva: No
Roger R. Stanton: Won’t say
William G. Steiner: No. “It’s one of the things the county does really well.”
Gaddi H. Vasquez: No. “That’s not under the board’s jurisdiction.”
**********
Privatize paramedics
Potential savings: $20 million *
Marian Bergeson: Yes
Jim Silva: No
Roger R. Stanton: Won’t say
William G. Steiner: Won’t say
Gaddi H. Vasquez: No. “Same thing.”
**********
Privatize jails
Potential savings: $6.4 million *
Marian Bergeson: Yes
Jim Silva: Won’t say
Roger R. Stanton: Won’t say
William G. Steiner: No. “We need to protect the integrity of the justice system.”
Gaddi H. Vasquez: Won’t say
**********
Privatize animal control
Potential savings: $2.2 million *
Marian Bergeson: Yes
Jim Silva: Yes
Roger R. Stanton: Won’t say
William G. Steiner: Yes
Gaddi H. Vasquez: Yes
**********
Privatize vehicle maintenance services
Potential savings: $3 million *
Marian Bergeson: Yes
Jim Silva: Won’t say
Roger R. Stanton: Won’t say
William G. Steiner: Yes
Gaddi H. Vasquez: Yes
Source: * Reason Foundation ** County estimate *** Creditors Committee
Researched by J.R. MOEHRINGER / Los Angeles Times
